Merrill Lynch Raises US Online Ad Forecast
Merrill Lynch (ML) is again raising its US online ad forecasts, to account for the third quarter IAB results and its own higher fourth quarter growth estimate.
For the full year 2007, ML is forecasting growth of 23.3%, up slightly from the previous forecast of 22.5%, which it says is based on the continued strength of search and branded.
The financial analyst says that year to date through September 2006, online advertising revenues were up 35.5% with Q3 up 33%, which is better than it expected as compared to its previous estimate of 31% growth for the year.
It adds that the strength of search is likely to be driving this growth, given Google’s continued success in improving monetisation as well as continued robust branded growth.
Search is expected to continue to outpace the growth of online branded, and grow 27% next year. Branded growth is also strong, but at a slower rate of 21%, says ML.
ML estimates that search will account for 42-43% of online advertising spend next year, continuing to take share of the total online pie, up from 41-42% expected this year.
With more spending going to social networks and online video really starting to become monetised, we suspect our estimates will need to be revised up over time.
| Merrill Lynch U.S. Online Advertising Forecast ($mn) | ||||||||
| U.S. | 2004A | 2005A | 2006E | 2007E | 2008E | 2009E | 2010E | CAGR 05-10 |
| Total U.S. Ad Spend | 267,238 | 276,781 | 289,789 | 297,904 | 308,330 | 318,197 | 330,925 | 3.6% |
| Y/Y Change | 7.8% | 3.6% | 4.7% | 2.8% | 3.5% | 3.2% | 4.0% | |
| U.S. Online Ad Spend | 9,626 | 12,542 | 16,811 | 20,734 | 24,072 | 26,918 | 29,109 | 18.3% |
| % of U.S. total ad spend | 3.6% | 4.5% | 5.8% | 7.0% | 7.8% | 8.5% | 8.8% | |
| Y/Y Change | 32.5% | 30.3% | 34.0% | 23.3% | 16.1% | 11.8% | 8.1% | |
| U.S. Pay-for-performance | 3,850 | 5,142 | 6,952 | 8,826 | 10,362 | 11,622 | 12,555 | 19.5% |
| % of U.S. online ad spend | 40.0% | 41.0% | 41.4% | 42.6% | 43.0% | 43.2% | 43.1% | |
| Y/Y Change | 51.4% | 33.5% | 35.2% | 27.0% | 17.4% | 12.2% | 8.0% | |
| U.S. Online Branded | 3,754 | 4,263 | 5,309 | 6,402 | 7,417 | 8,258 | 8,826 | 15.7% |
| % of U.S. online ad spend | 39.0% | 34.0% | 31.6% | 30.9% | 30.8% | 30.7% | 30.3% | |
| Y/Y Change | 17.4% | 13.6% | 24.5% | 20.6% | 15.9% | 11.3% | 6.9% | |
| U.S. Online Classified Spend | 1,733 | 2,132 | 3,088 | 3,767 | 4,381 | 4,972 | 5,559 | 21.1% |
| % of U.S. online ad spend | 18.0% | 17.0% | 18.4% | 18.2% | 18.2% | 18.5% | 19.1% | |
| Y/Y Change | 40.3% | 23.0% | 44.8% | 22.0% | 16.3% | 13.5% | 11.8% | |
| U.S. Email | 96 | 251 | 313 | 360 | 396 | 428 | 449 | 12.4% |
| % of U.S. online ad spend | 1.0% | 2.0% | 1.9% | 1.7% | 1.6% | 1.6% | 1.5% | |
| Y/Y Change | -55.8% | 160.8% | 24.8% | 15.0% | 10.0% | 8.0% | 5.0% | |
| U.S. Referrals/Lead Gen. | 193 | 753 | 1,149 | 1,378 | 1,516 | 1,637 | 1,719 | 18.0% |
| % of U.S. online ad spend | 2.0% | 6.0% | 6.8% | 6.6% | 6.3% | 6.1% | 5.9% | |
| Y/Y Change | 164.9% | 291.1% | 52.5% | 20.0% | 10.0% | 8.0% | 5.0% | |
The recent report from the Interactive Advertising Bureau and PricewaterhouseCoopers said that internet advertising revenues reached an estimated new record of $4.2 billion for the third quarter of 2006 in the US (see US Online Ad Revenues Reach Estimated $4.2 Billion).
Meanwhile, a forecast from research from the Kelsey group said that global local search and online classified advertising revenue will grow to $31.1 billion in 2010(see Local Search And Online Advertising To Grow To $31.1 Billion).